Written down value must reflect only depreciation actually allowed, not merely allowable, when computing loss on motor car sale.

For computing written down value under the income-tax provisions, only depreciation actually allowed can be deducted; depreciation merely allowable cannot be imported into the calculation. The court reasoned that the statutory definition of written down value turns on depreciation in fact granted, and section 10(3) does not justify substituting a notional allowance where the asset was partly used for business and partly for non-business purposes. Applying that approach, the sale of the motor car resulted in the larger loss claimed by the assessee, namely Rs. 708.

---

---

Issues: (i) Whether, for computing loss on sale of a motor car under section 10(2)(vii), the written down value had to be reduced only by the depreciation actually allowed to the assessee or also by the depreciation otherwise allowable under sections 10(2)(vi) and 10(2)(vi-a); (ii) if the first issue was answered in favour of the assessee, whether the loss on sale was Rs. 78 or Rs. 708.

Issue (i): Whether, for computing loss on sale of a motor car under section 10(2)(vii), the written down value had to be reduced only by the depreciation actually allowed to the assessee or also by the depreciation otherwise allowable under sections 10(2)(vi) and 10(2)(vi-a).

Analysis: The definition of written down value in section 10(5)(b) turned on the words "depreciation actually allowed" and not on notional or merely admissible depreciation. Section 10(3) only restricted the allowance where an asset was partly used for business and partly for non-business purposes; it did not authorise rewriting the definition of written down value by importing the full depreciation that might have been allowable absent that restriction. The language of the statute showed that only depreciation in fact granted under the Act could enter the computation.

Conclusion: The written down value had to be computed by taking into account only the depreciation actually allowed, not the depreciation merely allowable.

Issue (ii): If the first issue was answered in favour of the assessee, whether the loss on sale was Rs. 78 or Rs. 708.

Analysis: Once the computation of written down value was confined to the depreciation actually allowed, the correct basis required the Income-tax Officer to adopt the figure that reflected the full depreciation granted in the relevant years. On that basis, the sale of the car produced the larger loss claimed by the assessee.

Conclusion: The loss on sale was Rs. 708.

Final Conclusion: The reference was answered by holding that, in computing written down value under the Act, only depreciation actually allowed could be deducted, and on that footing the assessee's loss on sale was Rs. 708.

Ratio Decidendi: For the purposes of written down value, the governing expression is "depreciation actually allowed", so only depreciation in fact granted under the Act can be deducted and not depreciation that was merely allowable.

---